how electronic signrature works

How eSIGN Act Makes eSignatures Work?

The digital revolution is one of the major milestones in the history of modern human civilization. In present times, computers and the internet dictate the basic framework of every business. Simply put, you have to go digital or else risk the chances of falling back from progress. With a major share of business transactions happening online, the need for digital solutions for signature also becomes evident.

So, the importance of legislation, such as the esign act, has become very prominent. However, what is the role of such legislations in the functioning of electronic signatures? For beginners, we know that legislations point out the conditions that establish the legal admissibility of electronic signatures. So, what are the other factors in the esign act (Electronic Signature in Global and National Commerce Act) that drive the functionality of electronic signatures?

Also Read: An Overview of UETA and ESIGN Act

The following discussion would aim at finding out how the esign act helps in the working of electronic signatures. The discussion would proceed by starting with a brief outline regarding the need for electronic signatures and the esign act itself. However, the prime highlight of the discussion would deal largely with the different criteria that establish the legality of electronic signatures.

E-Signatures: An Overview

Electronic signature, or generally known as e-signature is data in an electronic form that associates logically with other data in electronic form. As the name implies, e-signature helps a signatory to confirm their approval, provide their consent, or sign a document or transaction. Some of the examples of e-signatures include hand-signature created on a phone or tablet with the help of stylus or fingers, a scanned image of an individual’s ink signature, or a biometric hand signature.

The market for e-signatures is growing substantially at faster rates, especially with the backing of legislation like the esign act. The surprising facts about the growth of the e-signature market can clear your doubts.

For instance, the total value of e-signature transactions has escalated from $89 million to $754 million in only five years. Statistics also indicate that the global e-signature market would depict growth at a CAGR of 34.7% from 2017 to 2023.At such a growth rate, the global e-signature market is most likely to reach a total value of $9.07 billion by 2023.

Also, the intricacies of how electronic signature works lead to a wide range of beneficial outcomes for businesses. Businesses could save around 55% to 78.62% by migrating to e-signature solutions on the costs for paper material, administration, subscription, and shipping.

The average error reduction rate and the average reduction rate in turnaround time with the use of e-signature is 80%. Along the same lines, e-signature leads to an 85% improvement in productivity alongside a 500% increase in customer loyalty. Financial institutions report that e-signatures bring a 92% reduction in scanning errors and a 66% reduction of cases of missing files.

Also, the backing of the esign act drives the adoption of e-signatures as essential instruments for security and legality in daily business operations. 81% of businesses which emphasize on legality and security aspects of e-signatures are in the banking and finance, healthcare, government, and pharmaceuticals sector.

There are a number of reasons to adopt electronic signature. Here are the top 10 reasons why you should adopt Electronic Signature for Your business.

The Origin of ESIGN Act

Speaking about legality, let us outline the origins of the electronic signature act that can help us in our discussion. Every one of us knows the flexibility, brought forward by the internet, in doing business. So, what made this possible? The answer is the Electronic Signatures in Global and National Commerce Act, which is widely known as the ESIGN legislation.

Before the launch of the esign act, businesses had to struggle with finding the perfect instrument for handling online transactions. Companies used to accept electronic signatures without any specific benchmark for validating their legality. The issue gradually escalated with many other countries engaging in the adoption of electronic signature technologies.

Therefore, the concerns for US businesses falling behind global companies led to the first thoughts about instating legislation to govern electronic signatures. So, the US Congress brought many bills regarding electronic commerce in 1999. All of the bills had the objective of promoting electronic commerce without imposing restrictions on specific technologies.

All the bills led to the formation of the Esign act that made it to the desk of President Bill Clinton on June 30, 2000. By that time, many states already had their versions of electronic signature laws. However, ESIGN brought the advantage of a federal safety framework to facilitate the element of security alongside legality in e-signatures. Most important of all, President Bill Clinton used an electronic signature for passing the ESIGN act US into law.

Digital Signatures and Electronic Signatures are two similar looking terms but are different from each other. Check out the difference between the two i.e. Digital Signature vs Electronic Signature

Importance of ESign Act in the Working of E-Signatures

The esign legislation gave the same status as that of written signatures to E-signatures. However, just placing an electronic symbol on a document does not indicate its validity as an enforceable contract. Therefore, you can find that ESIGN legislation presents different requirements for the use of e-signatures. So, to understand how the ESIGN legislation helps in the working of e-signatures, it is essential to reflect on the legal requirements of using e-signatures.

The Esign act 2000 deals with electronic signatures and electronic records that are widely prevalent instruments in present-day commerce. The legislation is applicable for validating e-signatures in all the 50 US states where federal law is applicable. In case of a discrepancy in the application of federal law, every state turns back to its electronic signature law. The majority of states in such cases follow the Uniform Electronic Transactions Act (UETA), which is one of the reliable legislation.

The Definition of E-Signature According to Esign Act

The basic definition of an e-signature according to the esign legislation implies that it is an electronic sound, process, or symbol that relates logically to a contract or any other record. The definition also implies that it is executed or adopted by a person with intent and consent to sign.

The definition further focuses on the legally binding nature of the e-signature. So, we can note that the legislation clearly emphasizes the association of an e-signature with a contract and the need for adoption by signatory with a binding intention. Based on the definition of e-signatures in the esign act, we can notice its role in the working of e-signatures. The act establishes a basic foundation for the use of e-signatures through the definition of e-signatures alongside emphasizing on their credibility.

Also Read: Top 10 Uses of Electronic Signatures

What’s In and What’s Out!

One of the important highlights in this context refers directly to the scope of the ESIGN legislation. The ESIGN legislation provides coverage for commercial, business, consumer, and governmental affairs purposes. However, there are certain exceptions to the use of e-signatures in specific cases. For example, e-signatures are not applicable in the case of creating and enforcing will, divorce, adoption, or family law matters, and even in the case of sensitive and classified governmental affairs.

Esign act US also bars the inclusion of unilateral records, and interestingly, section 103 of the legislation can help! Section 103 of the act contains the list of exemptions from the e-signature act. Furthermore, the basic tenets of the esign legislation that form the foundation for e-signature functionality are as follows.

  1. Compliance with the majority of precedents that imply the need for handwritten signatures on documents.
  2. The esign act also allows the use of a contract as legal evidence in court provided that it follows requirements.
  3. Most important of all, the e-signature act ensures the legal enforcement, effect, and validity of an electronically signed document.

While working with electronic signatures, it is commendable to understand how electronic signature works. Here is a quick guide to the electronic signature workflow.

Factors in Esign law that Validate E-signatures

Based on these aspects, we could observe that the e-signature act is responsible for definitiveness in the application of e-signatures. It assures e-signature users that the signature and the related document would be legally valid in a court of law. However, we need further introspection into the factors in the esign legislation that show how electronic signature works. Let us dive into the details of those factors below.

  • Expressing the Intent to Sign

The foremost factor that you shall note in the e-signature act is the intent to sign. The validity of an electronic signature depends on the user’s intent to sign. Therefore, esign act for electronic signature emphasizes on providing options for users to express their intent. For example, the option of “Accept” or “Deny” in e-signature requests can provide validation for the user’s intent to sign. The clause of intent to sign in the case of e-signatures is equally applicable for all involved parties. Every party involved in a transaction should express their intent to sign according to the e-signature act.

  • Validating Consent of the Parties Involved

The next significant factor that shows the effectiveness of the esign act is the need for consent. Do not confuse consent with intent since the latter expresses the affirmation of an individual for signing a document. All parties should provide consent for doing business in the electronic medium. The circumstances of a transaction could help in finding out the consent of a business.

On the other hand, the consumer’s consent is valid only if the consumer fulfills certain criteria. The criteria include receipt of Consumer Consent Disclosures and affirmative agreement for the use of electronic records for the transaction. Furthermore, the consumer should also never have withdrawn their consent for the transaction. Also, consumers should have evidence in the form of an audit of the signature process and workflow.

  • Association of the Signature with the Document

The Esign act for electronic signature also implies the need for associating an e-signature with the concerned record or document. The association may be either in the form of an indication about the process through which a signature is created. Also, a graphical or textual statement regarding the association of the e-signature with the document can be a part of the signed document.

It is important to look into the various factors while choosing an electronic signature solution for your business. Here are the top points you should consider while choosing an e-signature vendor.

  • Keeping Track

Also, the Esign legislation emphasizes the need for record retention. The record retention is generally suitable for audit logging. Documenting all the transactions and records created for each should be retained. Also, precise reproduction of all records should be available for the reference of all parties and retention purposes. Therefore, the esign act also ensures that the legal admissibility of e-signatures cannot be brought under question. The clause for retaining records of the transactions help in providing solid proof for the validity of a document and e-signature.

  • Validating the Completion of a Transaction

The next important element that presents a notable highlight about the functionality of the ESIGN legislation is the certificate of completion. The certificate of completion is an important requirement for validating an e-signature according to the ESIGN legislation. It includes the name of signatories involved in the transaction, history of authentication, digital signatures, related email addresses, and IP addresses of the signatories.

The certificate of completion should also include the chain of custody of a document in which it outlines the details about different activities and modifications in the document. The esign act also emphasizes on the recording of timestamp for each signature as well as modification in the document.

Furthermore, the facility of geolocation capture for each signatory could also help in supporting international transactions. Most important of all, the certificate of completion provides a clear indication regarding the completion of the transaction. After all, an official statement regarding a complete transaction is essential to safeguard it from any additional modifications.

  • Addressing Industry Requirements

The precedents of the Esign legislation also focus on addressing industry requirements, thereby promoting the e-signature adoption across various industries. The esign legislation provides clear indications regarding the privileges of federal and regulatory agencies for interpretation and application of the legislation in their respective industries.

The primary factor under concern in such cases is largely evident in the reason for creating the document. So, if the document’s purpose is aligned with the business, commercial, or consumer objectives, then Esign is applicable. However, authorities could disregard the application of esign legislation in case of governmental requirements that do not involve commercial transactions.

Bottom Line

On a final note, we came to know about the role of the Esign act in making e-signatures work. Most important of all, we can now look towards a future that is devoid of paper transactions. Just imagine the improvement in productivity and ease of carrying out organizational operations with e-signatures. The esign legislation provides a soundproof mechanism for governing the use of e-signatures.

However, we should also look at the long-term picture where we cane expects advanced methods for tampering documents with e-signatures. Well, transformation to the digital platform has its share of setbacks alongside the advantages. We have to learn how to make the best of its pros and improvise on the cons for the best results!

Posted by Brian Felix, 0 comments